Good Bookkeeping is a must for Real Estate Investors for many reasons.
Dave Rice with Key Bookkeepers provides multiple reasons and benefits for real estate investors to set up systems and keep accurate records. Together, they can help you accelerate your real estate investment strategy.
If you want to be viewed as a business by the IRS, you need to act like one. The IRS counts on good bookkeeping to substantiate your business.
Good Bookkeeping gives you the actual numbers you need to determine if you are making money or if there is room for improvement. Are you collecting all the rent? Are you properly categorizing expenses?
When filing your taxes, these numbers are the keys to lowering your taxable income. This alone can boost your actual returns.
Value of Good Bookkeeping
When you are looking for money from a lender, your best bet is to make it easy for a lender. They want to see how good your bookkeeping is. If your records only consist of a tax return, you will not make a strong impression. But, if you can easily produce multiple complete years of records and year to date records, you make it hard for the lender to say no.
Don’t forget the value of your commercial real estate. The Net Operating Income is simple to determine: Annual Income minus Annual Expenses. This result divided by the local market cap rate is an indication of what your property is worth.
Poor bookkeeping can result in one of two things when you are trying to sell your property.
Low Ball Offer
If the buyer is experienced and looking for a deal, they will only accept records that you can substantiate. Poor bookkeeping will lower your NOI and ultimately lower a potential buyer’s offer that reflects your actual numbers.
If a buyer is looking for a property that has good bookkeeping, and you don not, they will dismiss your property.
Ask any experienced commercial real estate broker. If you want to maximize the number you can get for your property, it starts with good bookkeeping. Keep your rents at the market rate and take good care of your property.
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